The Greek economy remains resilient and is expected to grow at a rate of 2% this year and 2.5% in 2025 as rising employment and real wages and strong tourism boost consumption, according to the OECD’s six-monthly report (Economic Outlook). .
Despite the slowdown in youth growth jobsthe employment rate and labor force shortages remain at historically high levels, he points out.
Wage growth reached 5.5% in the fourth quarter of 2023 on an annual basis, the OECD notes, with the minimum wage increasing by 9.4% in April 2023 and a further 6.4% in April 2024.
The absorption of Recovery and Resilience Fund resources and continued improvement in bank soundness will support investment, despite tight financial conditions, the report added, with investment forecast to grow 9% in 2025.
Inflation will continue to decline, but at a slower pace and is forecast to ease to 2.1% in the last quarter of 2025.
The forecast for primary surplus 1.8% of GDP this year and 2.1% in 2025 is appropriate, given the high public debt the report says, which is estimated to fall to 151% of GDP in 2025 from 161% in 2023. The growth of the economy and further progress in the fight against tax evasion will boost public revenues.
The report says the cost of borrowing Greek government 10-year bonds fell by 100 basis points (one percentage point) in March 2024 from a year earlier and the yield gap between Greek 10-year bonds and their German counterparts halved as Greece regained investment grade.
The OECD emphasizes that the main challenges facing the Greek economy are the strengthening of productivity and fiscal adjustment due to high debt.
He notes that in order to continue the debt reductionalongside the high spending necessitated by low investment in the decade of crisis, an aging population and tackling climate change, sustained and strong economic growth will be needed.
Productivity growth, which is a third lower than the OECD average, would simultaneously create more fiscal space and raise living standards.
A prerequisite for productivity growth is further progress in removing barriers to investment, notably by strengthening the justice system, reducing remaining barriers to the regulatory framework of retail and the liberal professions, and providing more and higher quality adult education.
The OECD notes that a large part of the public investment needed to support growth will have to be financed from the government budget after the end of the Growth and Resilience Fund resources in 2026, mainly by containing wage expenditure, reducing the fragmentation of public procurement, the further promotion of digitization and the simplification of public services as well as the expansion of the number of taxpayers.
3.1% growth of the global economy
For the global economy, the OECD forecasts that growth will pick up to 3.1% this year, the same as last year, before picking up slightly to 3.2% in 2025, supported by stronger real incomes as inflation eases and the reduction of interest rates.
For the Eurozone, growth will be anemic this year as well – 0.7% compared to 0.5% in 2023 – to strengthen in 2025 to 1.5%, while for the USA it predicts a GDP increase of 2.6% this year and 1 .8% in 2025.
Source: RES-MPE
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